Blucora, Inc. (BCOR)

[rudy-carter]

Listen to the CC Again
by: rgn1113
Long-Term Sentiment: Strong Buy 07/27/05 10:55 pm
Msg: 625059 of 625083
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=15293324&tid=insp&sid=15...

If you listen to the CC again, you will conclude that the sky is not falling at INSP. The loss of the Verizon contract is not a complete loss as INSP will get paid for performance instead of paid searches. Granted that $9 Million of revenue will be lost in H2 because of this change, it is not the end of the world. The verizon monetization loss is coming out of the Infospace netwrok and not the Switchboard network which is not affected. INSP reiterated strong relationships with Yahoo, Google, and Cingular. It is also adding MSN searches to the Dogpile web site by next week! $5 million of revenue will be lost in H2 because INSP will finally start to spend money advertising its Dogpile web site. That investment will come out of earnings in H2 and is the reason for the reduced profits in H2. That investment should increase traffic to the INSP network and is a good long term strategy. JV stated that his startegy is not meant to be for one or two quartes but for the long term. JV also emphasized that the relationship with cingular is growing stronger than ever. The reduced margins in music downloads is due to the mix of the music downloads but only 10% of cell phones are currenlty downloading music. Europe downloads are at 40%. INSP is the leader in mobile content in the US and this industry is at its infancy. Games are about 5-10% of mobile revenue and are expected to grow as well.

Conclusion: short term we are experiencing a setback with the loss of the Verizon contract and the reduced margins, but this should not be interpreted as a long term pattern or the end of growth for INSP. My takeaway from the CC is that INSP is in two high growth businesses and is looking for ways to grow both organically and by mergers and acquisitions. JV said that with $407 million in cash, he will be able to make acquisitions easily. Growth will also happen as a result of increased downloadable handset sales expected in Q4 and beyond. Therefore, given that we lost another 30% of our market cap and growth will resume, we are way undervalued here and I am switching my sentiment to a strong buy once again.

RGN